Apple and HTC settle patent dispute

Tonight, Apple and HTC ended their longstanding patent litigation. The agreement terminates all litigation and establishes cross-licensing of patents current and future for 10 years. The deal raises questions about whether Apple might step back from its aggressive litigation, working with competitors. Cross-licensing intellectual property tends to be mutually beneficial, and it's a tactic long pursued by Microsoft.

"We are glad to have reached a settlement with HTC", Apple CEO Tim Cook, says. "We will continue to stay laser focused on product innovation". HTC CEO Peter Chou remarks: "HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation".

Apple sued HTC in March 2010, alleging violation of 20 patents. "We can sit by and watch competitors steal our patented inventions, or we can do something about it. We've decided to do something about it", then-CEO Steve Jobs said. "We think competition is healthy, but competitors should create their own original technology, not steal ours". At the time, HTC was one of the largest, if not the largest, Android licensee. Now that distinction belongs to Samsung, which Apple also sued.

Today's agreement comes as HTC goes through financial hard times and sees its handset market share shrink. During third quarter, according to IDC, HTC fell from third to fifth place in smartphone share year over year -- 10.3 percent to 4 percent. By comparison, Apple share rose from 13.8 percent to 15 percent.

Terms of the deal weren't disclosed, but the agreement should help protect Apple and HTC from future litigation. Microsoft is the model of cross-licensing deals, which the company uses to protect customers as much as its own interests. Apple's strategy is different.

This isn't Apple's first cross-licensing agreement, but circumstances are different. In June 2011, the company settled with Nokia, which was the aggressor. Apple agreed to royalty fees as part of the deal. HTC's payment obligation, if any, wasn't officially revealed by either company.

Apple needs the settlement as much as HTC. As I expressed last week, aggressive behavior hurts Apple's reputation, which is one factor driving down the company's share price. Apple closed at $547.06 on Friday, down 22.4 percent from the 52-week high reached in September.